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Taxing perks: CBDT issues draft guidelines

BS Economy Bureau

No more free club memberships and credit cards. Rent-free accommodation to be valued at 10 per cent of the basic pay. And if the accommodation is furnished, 10 per cent of the cost of such furnishings will be added to the accommodation value.

Ending the suspense over what constitutes a perk and the value at which it will be taxed, the Central Board of Direct Taxes on Friday issued the draft guidelines defining perks and their valuation.

According to the guidelines, an employee will now be taxed at 10 per cent of her salary if the company provides her rent-free unfurnished accommodation. In case of accommodation with furnishings like television, air conditioner and refrigerator, an additional sum of 10 per cent per annum of their original cost will be added to the accommodation value.

If an employee is provided hotel accommodation, it will be taxed at 2 per cent of the salary per month.

The salary for this purpose will not include dearness, entertainment and other tax-free allowances.

For cars provided by the employer, the sum actually spent by the employer for its maintenance will be the value of the perk. Accordingly, the value of the perquisite will be taken as Rs 1,200 per month for cars with less than 1.8 litre cc engines and Rs 1,600 per month for bigger cars.

For cars owned by the employer and maintained by the employee, the perk will be valued at Rs 400 and Rs 600 respectively. The value of the perk will be Rs 600 more if a chauffeur is provided for.

If the assessee owns a car for which the company provides maintenance charges, the cost to the employer would be considered for tax purposes.

The department has also proposed that where the employer provides the employee with a sweeper, gardener or a personal attendant, the actual cost of hiring them will be the basis for computation of tax. Similarly, all utilities including free gas, electricity and water will be charged at cost.

The value of perks in case of interest free or concessional loans in excess of Rs 20,000 will be calculated as the difference between the interest payable on maximum outstanding monthly balance and the interest, if any, actually paid. The prescribed interest rates for housing loan, car loan and loans for purchasing tools of trade will be 10 per cent, 12 per cent and 6 per cent respectively.

All expenses for holidays paid for by the employer will be taxed at cost. However, free meals up to Rs 50 per meal and tea and snacks during working hours will not be taxed. Educational expenses for children of employees will be exempt to the extent of Rs 500 per month.

Credit cards and fees paid by the employer for club memberships will be considered as perk. For computers and electronic gadgets provided by the employer, the perk value will be taken as 25 per cent.

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